Explaining Health Reform: The New Rules for Determining Income Under Medicaid in 2014

Jun 30, 2011

To provide individuals and families access to affordable, high-quality health care, the Patient Protection and Affordable Care Act (ACA) expands Medicaid to cover low-income adults and children with incomes up to 133 percent of the poverty line. Millions of low-income parents, non-disabled adults who do not have dependent children (and who are generally ineligible for Medicaid today except in a small number of states) and, in some instances, children now covered through the Children’s Health Insurance Program (CHIP) will become newly eligible for health coverage through Medicaid as a result.

In addition, individuals and families who have incomes above the level needed to qualify for Medicaid but below 400 percent of the federal poverty line will receive tax credits to help them purchase coverage in the new health insurance exchanges. People with incomes up to 250 percent of the poverty line receiving premium credits will also get additional assistance with their cost-sharing charges. In total, an estimated 33 million more people who would otherwise be uninsured are expected to have coverage through Medicaid, CHIP and the exchanges by 2021.

To ensure coordination of eligibility and coverage across the different health care programs, the ACA requires states to make major changes in the way that they determine eligibility for Medicaid and CHIP in order to align with the income tax-based rules for premium credits in the exchanges. The biggest change involves how income and household size are defined to determine eligibility for Medicaid and CHIP (as well as the exchange premium credits). This issue brief explains the new rules, and describes the differences between these new rules and the current income counting rules used in Medicaid and CHIP.